After weeks of pressure from other EU members, German Chancellor Merkel relented on her austerity-only prescription and acquiesced to a stimulus package for the eurozone crisis.
Leaders of the eurozone’s four biggest economies – Germany, France, Italy, and Spain – agreed today to jumpstart growth of the besieged 17-member group with a roughly 130-billion-euro ($163 billion) package.
“I absolutely agree with what everyone else here has said – to devote 1 percent of the GDP of the European area additionally to growth, to efficiency in growth, and to investment,” German Chancellor Angela Merkel said in a press conference in Rome after the meeting.
The comments mark a turning point in discussions; until today, she resisted pressure from the other three countries to budge on her austerity-only recipe for exiting the crisis. The meeting, dubbed the “big four mini-summit,” was geared toward building consensus ahead of next week’s European Union summit. And while many of the details are still pending, the fact that Germany agreed to the French-proposed growth stimulus package is a good sign.
As Chancellor Merkel said herself, “That is the genuine signal that we need.” French President François Hollande also highlighted the breakthrough. “Who would have imagined a few weeks ago that [the issue of] growth would be on the agenda of [next week’s] summit?"
The pressure mounted on Merkel after the International Monetary Fund issued a blunt and forceful statement yesterday – apparently directed at Merkel – that made an urgent call for more fiscal integration. It also supported issuing eurozone debt in order to pool together risks and in doing so lower the lending rate for the troubled countries, while increasing it for fiscally conservatives.